Is the game up for Britain's pre-eminent self-made airline tycoon? The word is that Sir Michael Bishop, the boss of BMI British Midland, will take a back seat within a year.

Two weeks ago, it emerged that Virgin and British Midland were locked in talks over a possible merger.

The negotiations broke down because the two companies' projections for the growth of aviation varied wildly. But insiders said this weekend that a tie-up within months is still possible.

If that happens, it will be the final act of a career that has taken Bishop, 61, from a baggage handler to one of Britain's richest businessmen.

Dapper but not flash, Bishop was reputedly dubbed a 'cute little brute' by former rival Lord King of British Airways. It certainly will be cute if he can emerge from BMI realising a personal multi-million pound windfall.

Bishop's 25 per cent stake in BMI is put at £180m. If BMI and Virgin merge, it will create a business that will threaten the pre-eminence of British Airways, Europe's most powerful airline.

Critics say selling the business is now Bishop's only option. BMI traditionally was the choice of suits, offering quality service at a handsome price. But his business model has been trounced by the growth of low-cost air travel. So much so that two years ago, he was forced to launch his own low-cost airline, bmibaby.

His business is said to be incapable of a stock market flotation. Not only are commercial conditions for airlines awful but also there is little love for him in the City. Several years ago he floated British Regional Airways at 350p. It was bought by British Airways at 70p in 2001. Even though the business grew profits every year, some say British Airways overpaid. Whatever, the City took a bath and has not forgotten. The £78m sale price meant that Bishop trousered a personal £20m windfall.

The obvious buyer for BMI would be Lufthansa, the German airline. With SAS, the Scandinavian carrier, it has a 49 per cent stake in BMI and is a member of the Star Alliance group of global car riers. It is short of cash, however, having taken a beating on its transatlantic business. It's Lufthansa's problems that have prompted people close to Bishop to let it be known that BMI is available.

In 2001, operating losses at BMI itself were £29m. Last year the loss was £21.7m, though this was masked by the sale of a ground handling unit.

It may not sound like a fine legacy but Bishop has created a business holds 13.5 per cent of the takeover and landing slots at Heathrow - the industry's most lucrative commodity - making his BMI second only to British Airways.

Not bad from a man who, while not exactly born into poverty, is definitely self-made. The son of an Australian who settled in Manchester, Bishop was born into money. His father ran a specialist commercial vehicle business.

Bishop went to a public school but defiance marked him out. He rejected his father's choice, Shrewsbury - instead choosing Mill Hill, where he had friends. He left to join the family business, but refused to stay long.

The airline industry was his passion. From the age of seven when he went on a family flight from ration-book Britain to buy chocolate in Dublin, he was hooked. At 16, a summer job with a small charter business at Manchester airport confirmed his destiny.

His ambition was to run his own airline, He achieved it by the age of 36. He had begun by joining a small firm called Mercury which was taken over by British Midland in 1964. Under the new owners he rose through the ranks to become managing director by 30. He bought the company six years later. Spurned by the City, he turned to the United States for funds.

He described winning control as the happiest day of his business life. The worst was the Kegworth crash in 1989 when 79 people died aboard a British Midland jet which plunged on to the M1 in Leicestershire. It wasn't the first time Bishop had to deal with tragedy. He was 25 and on duty at Manchester when a plane crashed near Stockport, killing 72 people. He had to inform 40 relatives that their loved ones had died.

His career has been characterised by battles he has mostly won. When he started at BMI it served only domestic routes from the Midlands. Heathrow was sewn up by BOAC. It took Bishop three years to persuade Margaret Thatcher, who regarded him as one of her favourite businessmen, to open up the domestic market. He cracked the European market. Only the ability to fly transatlantic from Heathrow eludes him. Just four airlines are now allowed to do so. Overturning this restriction remains one of the few challenges left.

He's instinctively a Tory, but relations with the party have cooled. An informed observer said: 'He's exactly the type of person who would be a Tory activist if only the Conservatives weren't so beastly to people like him.'

Bishop is a rarity in the City: a man who is openly homosexual. 'His decision to vocalise was really brave,' said Ivan Massow, the gay independent financial adviser and friend of Bishop. 'In the circles he moves in you don't do that.'

Former colleagues describe him as 'someone you could tell your deepest, darkest secret to and be safe, knowing it would go no further.'

In the last two years he has lost two stone, thanks to a fitness regime. When in London he stays in the same room at the Savoy hotel. Other than airlines his passion is the arts. He owns the D'Oyly Carte Opera Company, which owns the Gilbert and Sullivan operettas.

He used to fly his own twin-engine plane but now relies on a chauffeur-driven Mercedes and a Rolls-Royce for special occasions. He will hand over his fortune to a charitable foundation.

Sober and cautious, Bishop believes that growth over the next two years will be elusive owing to the Iraq war, fear of terrorism, the consumer downturn and the Sars virus. This world view torpedoed the potential merger with Virgin, albeit temporarily. Virgin, say BMI insiders, saw a rosier future. Valuations were impossible under such a scenario.

BMI and Virgin have danced around each other for a decade, aware that their synergies - Virgin is strong across the Atlantic, while BMI is strong in Europe - made a union compelling.

There appears, however, to be a culture clash. From its base at Donington Hall in Leicestershire, BMI is remote and publicity-shy. Virgin is the opposite.

Bishop would likely take an honorary position in a new British Virgin Airways business but the real power will lie with Sir Richard Branson. Maybe that will be the final battle in Bishop's illustrious business life.

What they say

Sir Michael is a competitor, but he's a real gentleman, a shrewd negotiator and someone I particularly admire.Rod Eddington, head of British Airways

This time next year British Midland won't exist in its present form.Rival airline executive

You have to sort out an airfield for him if he visits because he loves to fly.Ivan Massow, independent financial adviser

Profile

Name Michael Bishop

Job Chairman of BMI British Midland Airways

Born 10 February 1942

Education Mill Hill School

Career Joined family engineering business after school. Quickly left to join Mercury Airlines, which was bought by British Midland. Became general manager in 1969, managing director in 1972 and chairman in 1978 after a wealthy American dentist lent him the money to gain control. Was non-executive chairman of Channel 4 Television, 1991-97